Why IT is critical to the success of Mergers?

IT is not considered as seriously as it should be when it comes to mergers. The compatibility of systems of the two companies and the complexity – and timelines as well as cost for integration – are rarely given much importance! I have believed that this has been to the detriment of the shareholder value in the long term.. That is why I was not such a great fan of Nick Carr’s plea Does IT Matter?. I think it does!!

Here are two reasons cited by the authors on why IT is critical to the success of mergers:

First, IT-enabled synergies tend to be fairly long-term benefits that require tremendous complexity to be achieved. For example, while many merger integration programs, such as sales-force integration and seamless order processing, are targeted to take place within the first six months of the close of the deal, a fair percentage of IT-enabled synergies require substantially longer, perhaps 18 months to 24 months past deal close.

These longer-term efforts include standardizing and converging enterprise data and application platforms, such as ERP and supply chain, as well as de-layering or eliminating organizational duplication and complexity. When faced with projects of such magnitude, senior management sometimes demurs, shifting its focus instead to synergies the company can achieve quickly.

The second reason management fails to fully embrace IT integration is that it usually requires significant investment – potentially hundreds of millions of dollars – in areas such as rationalizing applications portfolios, migrating customers and products, and building new capabilities that combine the best of both companies. (Ironically, once explained, Wall Street will tend to accept these one-time costs.)

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